Benchmarks end volatile session slightly in red on profit booking

Indian equity benchmarks ended the volatile day of trade slightly in the red on Tuesday with Sensex and Nifty declining below their crucial 27,700 and 8,400 levels respectively as investors opted to offload their positions in risky assets after two days of continuous rally. After a weak opening markets gained momentum and entered into positive terrain as sentiments turned up-beat on forecast of timely monsoon coupled with the government containing the fiscal deficit at 4.00% of the GDP for 2014-15. Further, rate cut hopes by RBI at its upcoming monetary policy review on June 2 too aided the sentiment.
 
But once again markets succumbed to selling pressure as investors opted to book profit at higher levels and ended the otherwise upbeat session of trade in negative terrain. However, losses remained capped with SBI’s Monthly Composite Index, a leading indicator for manufacturing activity in Indian Economy, up from 46.8 in April 2015 to 53.8 in May 2015. Meanwhile, Finance Ministry is expecting a rating upgrade by credit agencies by the year-end on the back of policy initiatives, moderating inflation and improvement in the fiscal position of the government.

On the global front, European markets were trading in green in early deals to near multi-year highs after a European Central Bank (ECB) policymaker said the ECB would front-load an asset purchase scheme, aimed at boosting growth in the region. Asian markets ended the Tuesday’s trade mostly in the green as surging Chinese shares and Wall Street's record close offset continuing worries over Greece's fiscal woes.

Back home, sentiments remained dampened on reports that foreign portfolio investors sold shares worth a net Rs 202.12 crore on May 18, 2015, as per provisional data released by the stock exchanges. Selling in banking counter dampened the sentiments after Indian ratings warned that bad loans of Indian banks were seen rising to their highest levels in nearly 14 years. The rating agency further said that it estimates total impaired loans at 13% (of overall loan book) for FY16. 4.9% of this would be gross non-performing loans and the rest would be restructured loans, etc.
 
Moreover, power generation and distribution companies, which were up after India Meteorological Department and POSOCO signed MoU to increase the efficiency of power sector  to make them weather proof, too edged lower by close of trade. On the flip side, software and technology counters edged higher as the dollar rose to almost a one-week high against a basket of currencies, recovering from a four-month low.

The NSE’s 50-share broadly followed index Nifty declined by around ten points to end below the psychological 8,400 support level, while Bombay Stock Exchange’s Sensitive Index -- Sensex declined by over forty points to end below its crucial 27,700 mark. Broader markets too struggled to get some traction during the trade and ended the session mixed. The market breadth remained in favor of advances, as there were 1,453 shares on the gaining side against 1,289 shares on the losing side while 115 shares remain unchanged.

Finally, the BSE Sensex declined by 41.77 points or 0.15% to 27645.53, while the CNX Nifty lost 8.00 points or 0.10% to 8,365.65.

The BSE Sensex touched a high and a low of 27872.23 and 27574.07, respectively. The BSE Mid cap index was down by 0.15%, while Small cap index up by 0.36%.

The top gainers on the Sensex were Hero MotoCorp up by 2.16%, Wipro up by 1.65%, Vedanta up by 1.49%, Infosys up by 1.33% and Tata Steel up by 1.13%. On the flip side, HDFC down by 2.04%, Tata Motors down by 1.95%, ONGC down by 1.54%, Bajaj Auto down by 1.02% and Hindustan Unilever down by 0.84% were the top losers.

The gaining sectoral indices on the BSE were IT up by 0.73%, TECK up by 0.73%, Consumer Durables up by 0.54%, Realty up by 0.47% and Metal up by 0.43% while, Auto down by 0.77%, Oil & Gas down by 0.45%, PSU down by 0.40%, FMCG down by 0.22% and Bankex down by 0.17% were the losing indices on BSE.

Meanwhile, Sugar production in India has hit an eight-year high, breaching a food ministry forecast for 2014-15. As per the latest data compiled by the Indian Sugar Mills Association (Isma), mills produced 27.85 million tonne sugar up to May 15, higher by 16 percent compared with 24 million tonne produced during the corresponding period in 2013-14. The production this year is the highest since 2006-07 when it was 28.4 million tonne.

State wise from the major sugar producers, Maharashtra produced 10.44 million tonne of sugar till May 15, by 35 percent from 7.72 million tonne in the corresponding period last year; Uttar Pradesh produced 7.08 million tonne till May 15, compared with 6.51 million tonne a year before, while output in Karnataka went up to 4.87 million tonne from 4.11 million tonne.

On the concern side, while the higher-than-expected output has further aggravated a glut in the market and continues to pressure ex-factory sugar prices, it has also resulted in huge cane arrears to farmers at over Rs 21,000 crore, which is almost 35% of the total cane price payable in the season. ISMA has demanded that the Centre should either clear cane arrears to farmers directly or purchase 3 MT of sugar from the millers at the earliest to help them in making outstanding cane payments.

Consumption too remained muted and while the sugar production is much higher than last year, despatches of the sweetener for domestic consumption during the current season until April 30 were almost at the same level of 14.6 million tone, although Sugar prices in the domestic market are highly depressed and are ruling at Rs 2,600 per quintal in northern parts of the country and at Rs 2,300 per quintal in southern and western parts of the country.

On the export front, due to depressed global prices, mills have exported only 4.6 lakh tonne of sugar (both raw and refined) until the first week of May. The government had earlier this year announced Rs 4,000 per tonne as subsidy for exports of 1.4 MT of raw sugar. Sugar year runs from October to September and the Sugar stock at the end of this season in September is estimated to touch 10.30 million tonne, the highest in the last six sugar seasons.

The CNX Nifty touched a high and low of 8,427.80 and 8,335.00 respectively.

The top gainers on Nifty were Hero MotoCorp up by 2.32%, UltraTech Cement up by 1.79%, Zee Entertainment Enterprises up by 1.48%, Infosys up by 1.46% and Wipro up by 1.43%. On the flip side, Housing Development Finance Corporation down by 2.23%, Tata Motors down by 2.10%, Oil & Natural Gas Corporation down by 1.52%, Cairn India down by 1.40% and Mahindra & Mahindra down by 1.32% were the top losers.

European Markets were trading in the green; Germany's DAX was up by 1.78%, France's CAC up by 1.82% and UK's FTSE was up by 0.36%.

The Asian markets closed mostly in green on Tuesday, following another record close in US markets. Chinese policymakers announced guidelines for reform priorities in 2015, ranging from streamlining administrative procedures to boosting the yuan’s global role, as Beijing steps up efforts to open up the country's capital markets. The Bank of Japan is expected to expand its already-massive stimulus programme in October, even though Governor Haruhiko Kuroda has repeatedly stated that there is no need to do so. In April 2013 the BOJ pledged to achieve 2 percent inflation in about two years, after decades of deflation or very small price rises, unleashing a multi-trillion yen asset purchase programme. The central bank revised its goal last month and now expects inflation to reach 2 percent by April-September 2016. Japan’s Core Machinery Orders rose to 2.9%, from -0.4% in the preceding month. Hong Kong unemployment rate was 3.2% for the three months ended April 2015, down from 3.3% recorded between January and March. The underemployment rate also dropped to 1.3% in February-April from 1.4% in January-March. Total employment fell 8,800 to 3.792 million in the period. The labor force also shrank from 3.928 million to 3.919 million.